Let’s go ahead and clear the air: life isn’t easy, but it sure is expensive. That’s the reason why there are countless loans for us to pick up the slack. If you aren’t a pro at loans or don’t fully understand installment loan benefits, keep reading.
I imagine you’re familiar with what a loan is, but few people really get the differences between the various loan types available to us. This makes picking the right one–a truly risky investment–almost like a shot in the dark.
You have to do your research and educate yourself on all the variations banks and establishments loan money to the average person. Right away, you’ll discover a pretty mainstream consensus that the installment loan is your best option.
Installment loans are loans on a specified amount that will be repaid over a fixed and pre-determined amount of time. And there are plenty associated installment loan benefits that we will get into later on in the article.
Read on to educate yourself on what separates installment loans from other loans and why you should invest in one!
Installment Loan Vs. Other Loans
What’s unique about an installment loan?
Well, if we boil the field of finance down, there are really only a couple of different types of loans. Sure there are credit card loans and student loans and that sort of thing, but we can boil it down to just two by how the loan is repaid.
Regardless of how they are marketed to consumers, all loans come down to either an installment loan or something called “revolving credit.”
The installment loan benefits make these types safer and more structured and dependable. The rates are fixed so there aren’t any surprises and they offer a very clear repayment plan from the beginning.
When you think of a “loan” (versus something like a credit card), you’re probably pulling up an idea of an installment loan. Home mortgages and car loans–even those “signature” loans are all paid back over a predetermined installment plan.
The other type of loan, revolving credit, (things like credit cards) typically comes with higher interest rates and a handful of fees. There isn’t a set repayment date, but there will be a minimum monthly payment.
The hope here is that the consumer will continue to use the card to buy things while the interest racks up. Debt revolves and can build up even at the regular repayment rate.
When’s a Good Time For An Installment Loan?
If you’re ever faced with the decision between an installment loan or revolving credit, definitely shoot for the former. All around, it’s a safer investment with a clear beginning and end and detailed repayments.
There’s less of a chance that things can go wrong when we don’t have the power to keep charging to our credit cards. It’s a good idea to invest in an installment loan if money is tight and you need something to get you through a tough spot.
You can take out installment loans on about anything you can think of, but you’re the one in control of your credit. Let’s get into other installment loan benefits so that it’s easier to see why it’s a clear choice:
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Credit Score Loan Size/Amount Loan Term APR Origination Fee All can apply $100 - $15,000 1 - 60 4.99% - 1,386% Varies by lenderCredit ScoreAll can applyLoan Size/Amount$100 - $15,000Loan Term1 - 60APR4.99% - 1,386%Origination FeeVaries by lender
Installment Loan Benefits You Might Not Know
By now, you probably understand at least a little why you should avoid revolving credit. But there are loads of other benefits you may not know about that will help you out tremendously with an installment loan:
1. You Won’t Have to Leave the House to Request
Some time ago, asking for a loan consisted of dressing up really nicely and sweating through a rehearsed plea for money. But with installment loan benefits, gone are those days!
If you choose an online lender for your installment plan (which many lenders are nowadays), you won’t have to leave the house to request. This is huge considering the many tricky situations people can get into when borrowing money.
Just imagine for a second that a person lives in a very rural area or is doing business in a far-off country. If a money disaster were to strike, the odds of them being able to immediately go in person to request at the bank are slim.
But now lenders have moved a lot of the process online, including filling out and submitting requested forms, speaking with a live agent, and receiving updates. No more feeling uncomfortable because your interaction isn’t discrete.
2. Budgeting is Easier With Installment Loans
When you have to constantly come up with a new payment amount that’s only a fraction of the amount you owe, budgeting can get really confusing.
That’s typically the way things go down with credit cards and other types of revolving credit. Repayment is time-sensitive and for every payment you skip, the next one could be higher, along with a higher interest rate.
And that’s when the hole starts to get deeper and deeper, causing a lot of people to fall into credit card debt or bankruptcy. You can skip all that by investing in an installment loan.
Because you and the bank settle on an amount and a periodic due date ahead of time, there’s no need to worry about having to budget more money here or there. And it will always be due on the same day each month.
This repayment schedule is one of the biggest installment loan benefits, as it helps budgeting over long periods pretty simple. You’ll have one recurring monthly payment to worry about, and that’s about it.
3. No Surprise In Payment Amount
Like we mentioned before, the amount will always stay the same. There won’t be any hidden fees for using a card at a certain ATM. There won’t be any adjusted rates or inflating interest over time. Everything is fixed, including the amount.
When you sign an installment loan with a bank or lender, they are also signing a contract with you that states you are guaranteed a fixed rate. And that goes for the life of the loan, no matter how long it is.
The deal won’t change over time or fluctuate. And the only way for any new pay period or pay amount to come into play is if you sign a new contract. No new contract, no change in charges.
4. It’s Less Expensive to Borrow
While this might not be the case in every single situation, many times the installment loan will cost you a lot less money over the long run.
Credit cards tend to fall in the annual percentage rate (APR) range of 13-23%. And that added interest could tack on a lot of money if you aren’t careful about making payments on time.
Credit card interest rates can compound each month when the balance isn’t paid in full. This means that the total can keep growing and stacking on itself. Again, costs and more costs.
On the other hand, though, installment loans usually offer more relaxed interest rates (something more like 2-18%, depending on if it’s a secured loan or not). And this will save you hundreds to thousands over the term of your loan.
Never worry about paying for late payments and getting charged for exceeding your credit limit again.
You’ll Get Your Money Faster
Want to hear another one of those incredible installment loan benefits? With an installment loan, you’re likely to get your money a lot faster. No snail mail involved.
It’ll likely take you two days to two weeks to receive your money after filing. And if you’re borrowing from a lender you currently bank with, that money should get transferred right to your account in a matter of days.
Where to Go For an Installment Loan
If you’re interested in the installment loan benefits, you should understand that your credit score is a very important determining factor. As with borrowing from essentially anywhere, the credit score will serve as your financial history.
In the months before you sign your request for an installment loan, keep a close eye on your score and talk to bankers on what you can do to raise it. Use free credit review services and talk only to qualified representatives from your lender.
It’s a good idea to start by talking to your banks anyways. Because you have a relationship and history already, they may be able to offer you even more lenient options with lower interests rates. Ask about specials or discounts for members.
If your bank isn’t an option, you should research into other institutions (such as online lenders) who offer installment loans with a credible history. Consider trusted lenders like Bonsai Finance for alternative financing options.
Don’t fall prey to scams by not doing your research! Read the fine print, read reviews. Don’t get lazy on your credit.
No one can really tell you what’s best for you, but when it comes to finance and loans, there are clear winners in certain situations. Make sure to talk to your bank and get their advice (if you trust them) before you make major decisions.
At Bonsai Finance, we’re committed to promoting the development of responsible lending with a simple and stringent vision: promoting access to personal loans to more people and at the same time fighting against long-term debt.